764 F.3d 739
7th Cir.2014Background
- James A. Scalzo, a bank officer, pled guilty to bank fraud (18 U.S.C. § 1344) and money laundering; district court sentenced him to 35 months and ordered $679,737.23 restitution.
- Scalzo originated and approved multiple unsecured loans at two institutions (Fox River State Bank and Consumers Cooperative Credit Union), forged signatures, skimmed loan proceeds for personal use, and used later loans to pay off earlier fraudulent loans.
- Two Credit Union loans (to P.D.’s parents and to C.P.) were disputed: Scalzo argued they were not fraudulent and were not part of his negotiated losses; government contended they were used to conceal earlier Bank fraud and later defaulted, producing $493,710.23 in losses to the Credit Union/insurer.
- The district court deferred restitution ruling, received a government supplement and PSR showing the Credit Union losses (CUNA paid $468,710.23 under a “dishonest employee” claim; Credit Union paid $25,000 deductible), and ordered restitution including the disputed loans.
- Scalzo renewed challenges (insufficient factual basis, lack of agreement in plea, causation), but the court held the plea and PSR supported inclusion; this appeal followed.
Issues
| Issue | Scalzo's Argument | Government's Argument | Held |
|---|---|---|---|
| Whether district court erred by not fully accounting for CUNA’s loss | PSZ: court failed to reconcile ~$13,700 difference and may have included non-MVRA items | Gov: PSR/CUNA figures reliable; difference possibly from another loan item; defendant forfeited detailed challenge below | Court affirmed — reliance on well-supported PSR not abused; lack of timely objection limits review |
| Whether Credit Union loans were criminal conduct and thus restitutionable | Scalzo: loans were not fraudulent, not part of plea agreement losses; no proof he knew appraisals were inflated | Gov: Information and plea expressly listed loans as part of scheme; loans concealed earlier fraud and foreseeably caused loss | Court affirmed — guilty plea and plea/information provide factual basis; loans part of scheme and restitutionable |
| Whether government proved causation by preponderance | Scalzo: losses due to borrower defaults, not his criminal acts | Gov: Scalzo arranged loans to conceal prior fraud, used inflated appraisals, urged refinancing; insurer paid under “dishonest employee” coverage | Court affirmed — causal link established; losses would not have occurred but for Scalzo’s scheme |
| Whether restitution under MVRA properly awarded to Credit Union/insurer | Scalzo: MVRA should not cover these losses absent direct criminal act tied to those loans | Gov: MVRA authorizes restitution for victims harmed in course of scheme or by direct foreseeable consequences | Court affirmed — losses were direct/foreseeable consequences of the scheme and covered by MVRA |
Key Cases Cited
- Robers v. United States, 134 S. Ct. 1854 (2014) (describing MVRA’s purpose to require offenders to restore victims’ property)
- United States v. Hosking, 567 F.3d 329 (7th Cir. 2009) (district court must base restitution on a complete accounting in PSR or supplementary evidence)
- United States v. Panice, 598 F.3d 426 (7th Cir. 2010) (court may rely on PSR if well supported and reliable; defendant must show PSR inaccuracy)
- United States v. Randle, 324 F.3d 550 (7th Cir. 2003) (MVRA restitution authorized for victims harmed by conduct in course of a scheme element)
- United States v. Kilcrease, 665 F.3d 924 (7th Cir. 2012) (guilty plea supplies adequate factual basis for essential elements of offense)
- United States v. Rand, 403 F.3d 489 (7th Cir. 2005) (restitution may include direct and foreseeable consequences of the crime)